HR In a Truly Capitalist System

by Matthew Stollak on Monday, April 29, 2013

What would happen if HR truly operated in a truly capitalistic society where everyone is a rational actor?

In such a world, there would be a plethora of choices and perfect information about which choice to make.  Needs would be addressed quickly as businesses operate to fill that vacuum at maximum profitability.  Employees will find those organizations which put together the optimal compensation package with the appropriate work/life balance.  On the other side, companies will try to maximize employment with the best combination of knowledge, skills, and abilities at the lowest wages they can.  Equilibrium will always be reached where supply meets demand.  Consumers, companies and workers will choose the option that is most appropriate to their lifestyle.  Government will not interfere and "distort" the playing field.

What would this mean for HR?

  • Would nepotism disappear as it would be viewed as an inefficient way to find talent, or is it, on certain occasions, a politically expedient choice?
  • Would all salaries become public knowledge, as pay secrecy leads to imperfect information
  • Would negotiation and pay unfairness become a thing of the past as all parties enter the contract with perfect information?
  • Would there be a need for training as firms would only hire those who had the proper qualifications and skills to do the job correctly?
  • Would there be a need for safety committees or OSHA, as taking shortcuts, in the long run, would be inefficient?
  • Would wellness initiatives disappear, as employees make the right choice in diet and exercise?
  • Would performance appraisals be done frequently to address any problems that arise, instead of waiting to be done annually?
Unfortunately, this nirvana is extremely difficult to achieve.  Access to good information is difficult and time consuming.  Optimal choices are not always available or easy to discern.  Even with years of civil and human rights legislation, prejudices and social ills continue to pervade the workplace.  And, in the absence of profit, companies are unlikely to enter arenas such as rural mail delivery or public sector necessities as police or firefighting. 

As a result, we get wage theft.  We get industrial accidents in West, Texas and Bangladesh.

How would you see HR changing in a truly capitalistic society?

A Modest Proposal on Compensation

by Matthew Stollak on Tuesday, April 23, 2013

Three charts have kept my interest for the past few months.

1.  Corporate profits are at an all-time high

2.  Wages as a percent of the economy are at a low

3.  CEO pay continues to grow

 4.  Workers are more productive, yet wages haven't matched that productivity

Given the combination of the above, I make the following modest proposal to address the above issues:

1.  Overall compensation increases for Key Employees and Highly Compensated Employees, as defined by the IRS, will be capped...UNTIL
2.  Compensation increases for the rest of the employees averages 5%.
3.  Thereafter, the cap is removed.

A simple enough example:
a) It would take $500,000 to raise the compensation of the bottom 92% of employees by 5%
b) The top 8% could not see their overall compensation raised by more than a total of $500,000 until part a is reached.

1.  If you want to pay exorbitant amounts of money to your top level people, go long as most employees see some gain from the success of the organization
2.  By averaging compensation at 5% for lower-level employees, it provides flexibility to recognize high performing employees.

On Hugh Howey's "Wool"

by Matthew Stollak on Tuesday, April 16, 2013

Based on sterling recommendations from Laurie Ruettimann and Neil Morrison, I picked up the Omnibus edition of "Wool," a series of science fiction novellas from author Hugh Howey.

The basic premise is that the outside world has become toxic forcing humanity to live in 144-story silos, where the bottom third is dedicated to farming and mechanical upkeep, the middle third to IT, and the top third to the professional class and living quarters.

In the first novella, Wool, Holston, the sheriff, is investigating the death of his wife, and decides to resign; this means exile to the outside where he is expected to clean the sensors and windows and die.

In the second novella, Proper Gauge, Mayor Jahns and Deputy Marnes, look to find a replacement for Holston.  They engage in succession planning, a series of reference/background checks, and interviewing to make a selection among three candidates.


No wonder Laurie and Neil liked it.

I'm continuing on with the 3rd novella, Casting Off, but I swear if I read about the talent communities at the hydroponic farm...I'm done!!!

The Fifth Business and Rating Employees

by Matthew Stollak on Thursday, April 11, 2013

One of my favorite books is the first installment in the Deptford Trilogy by Robertson Davies called "The Fifth Business."

Davies tells the story of Dunstan Ramsay, a headmaster of a Canadian School for 45 years who has decided to retire.  A testimonial dinner is held in his honor, but he takes umbrage at the "tribute," arguing that it has trivialized his life.  He is determined to set the story straight.

What, pray tell, is the Fifth Business?

In the preface, Davies defines it as "Those roles which, being neither those of Hero nor Heroine, Confidante nor Villain, but which were nonetheless essential to bring about the Recognition or the denouement, were called the Fifth Business in drama and opera companies organized according to the old style; the player who acted these parts was often referred to as Fifth Business."

Toward the end of the novel, he further expounds on the concept when one of the characters says to Dunstan:

‘Who are you? Where do you fit into poetry and myth? Do you know who I think you are, Ramsay? I think you are Fifth Business.

‘You don’t know what that is? Well, in opera in a permanent company of the kind we keep in Europe you must have a prima donna – always a soprano, always the heroine, often a fool; and a tenor who always plays the lover to her; and then you must have a contralto, who is a rival to the soprano, or a sorceress or something; and a basso, who is the villain or the rival or whatever threatens the tenor.

‘So far, so good. But you cannot make a plot work without another man, and he is usually a baritone, and he is called in the profession Fifth Business, because he is the odd man out, the person who has no opposite of the other sex. And you must have Fifth Business because he is the one who knows the secret of the hero’s birth, or comes to the assistance of the heroine when she thinks all is lost, or keeps the hermitess in her cell, or may even be the cause of somebody’s death if that is part of the plot. The prima donna and the tenor, the contralto and the basso, get all the best music and do all the spectacular things, but you cannot manage the plot without Fifth Business! It is not spectacular, but it is a good line of work, I can tell you, and those who play it sometimes have a career that outlasts the golden voices…’

When we are involved in rating and recognizing employees, we spend a significant amount of time on the prima donna, the tenor, the contralto or the basso. However, the crucial employee is the baritone.

Can you identify the Fifth Business in your organization?